- News Release 2008-049 -

Archived - Backgrounder
Process for Designating Stock Exchanges

Archived information

Archived information is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.


With the integration of global financial markets, the rapid growth in Canadian Registered Retirement Savings Plan (RRSP) and Deferred Profit Sharing Plan (DPSP) assets, the removal of the foreign content limit on tax-deferred retirement assets enacted in 2005, and technological advances in securities trading systems, Canadian investors are increasingly looking to foreign securities listed on foreign stock exchanges for return enhancement and portfolio diversification. New domestic exchanges are also being created, expanding the range of publicly-listed Canadian securities available to Canadian investors. This has contributed to a rise in the number of requests from domestic and foreign stock exchanges to be qualified under the Income Tax Act for RRSP and DPSP purposes. 

Budget 2007 updated the concept of "prescribed stock exchange", used for a variety of purposes under the Income Tax Act, in order to make the prescription process more transparent and flexible to meet evolving market needs. In place of the two former lists of prescribed stock exchanges (domestic and foreign), there are now three categories of stock exchange: Designated Stock Exchange, Recognized Stock Exchange and Stock Exchange. A description of each category of exchange and their Income Tax Act implications are presented in Annex 5 of Budget 2007 (http://www.budget.gc.ca/2007/plan/bpa5a-eng.html). 

Under the new system, securities listed on a Designated Stock Exchange are eligible to be held in an RRSP and a DPSP. Designated Stock Exchanges include all prescribed exchanges as of December 13, 2007, and additional exchanges designated by the Minister of Finance by way of public notice since this date (see Annex). 

This document presents some of the considerations against which additional exchanges will be evaluated for designation status as well as the process under which exchanges can seek to be designated by the Minister of Finance.  

The Minister of Finance's role is to ensure that investments, given their tax-deferred status for policy purposes, trade on well-governed, regulated and transparent markets. Designated Stock Exchanges must therefore be explicitly designated, by public notice, by the Minister of Finance. Designated Stock Exchanges are also considered to be Recognized Stock Exchanges and Stock Exchanges for the purposes of the Income Tax Act. Recognized Stock Exchanges are determined by definition under that Act. "Stock Exchange" is not defined in the tax law; it is intended that the general legal and commercial meaning of the term will apply.

The new designation process and the kinds of considerations described herein will expedite the review of applications from exchanges and provide more transparency around the factors used to evaluate such applications.

Designation status is not an endorsement or recommendation of individual securities listed and traded on the exchange. 

Considerations to Qualify as a Designated Exchange

The Minister will consider all relevant information without limitation when evaluating an exchange's application for designation status. This will include the following considerations. 

For domestic and foreign-based exchanges:

1. The exchange carries out the normal business of an exchange in listing securities, facilitating the trading, clearing, and settlement of these securities, monitoring and enforcing trades executed on its system, and offering transparent pricing information to the public.

2. The exchange has acceptable standards for new company listings, including standards that address the number of shareholders, the dispersion of ownership, and for the maintenance of a listing.

3. The exchange operates within a regulatory framework that meets acceptable standards in relation to investor protection, disclosure requirements, corporate governance, and market integrity, as may be espoused by the International Organization of Securities Commissions (IOSCO).

4. The exchange has an experienced management and governance team, a successful track record of operations, and sufficient financial resources to ensure long-term viability.

5. The exchange has a range of listings and adequate liquidity for investors to buy and sell securities at reasonable bid-ask spreads.

For foreign-based exchanges:

6. The host country of the exchange has commercial, legal and tax relations with Canada, for example, as demonstrated by having entered into a comprehensive tax information exchange agreement or a comprehensive tax treaty.

7. The host country is a member in good standing in the international financial community through membership in such organizations as the World Trade Organization, the International Monetary Fund, IOSCO, the Financial Action Task Force, or similar bodies.

8. The securities regulatory and juridical framework of the host country of the exchange provides rights and remedies to Canadian investors, including brokers acting on investors' behalf, which are comparable to those available to investors in Canada.

9. The exchange is recognized by the host government and other foreign governments, where applicable, for tax purposes comparable to those for designated exchanges under the Canadian Income Tax Act.

10. The host country of the exchange has a low risk of imposing capital restrictions or other impediments on the liquidation of investments and the repatriation of funds by foreign investors.

Designation Process

Request for Designation

Exchanges seeking designation should submit a written request from a senior representative of the exchange to the Minister of Finance at the address below. Submissions should include sufficient information about the exchange's governance, ownership, financial resources, trading systems and infrastructure, listings, listing standards, liquidity measures, regulatory framework, and other pertinent factors so as to enable the Department of Finance to assess the exchange's application against the guiding principles contained herein. If an exchange operates more than one tier, submissions are to indicate for which tier(s) the exchange is seeking designation status. Additional information may be requested as needed.


All requests for designation will be acknowledged in writing. Following the assessment process, exchanges designated by the Minister of Finance will be notified and the official name of the exchange, or tier(s) of the exchange, published on the Department of Finance's website. 

Where the Minister of Finance declines an application for designation status, the exchange will be notified in writing. Exchanges may resubmit a request for designation if their circumstances change sufficiently to address any deficiencies, errors, or omissions identified in their initial application.

The Minister reserves the right to re-evaluate the circumstances of a previously designated exchange and, where justified, revoke its designation status.


    Minister of Finance
    Department of Finance Canada
    140 O'Connor Street
    Ottawa, ON  K1A 0G5

    c.c.:      Senior Assistant Deputy Minister, Tax Policy Branch Assistant Deputy Minister, Financial Sector Policy Branch

Annex: Designated Exchanges

- News Release 2008-049 -